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New Delhi: India has decided to turn its commodities regulator into an independent body with powers to actively police a market that has grown rapidly since futures trading was first introduced in 2002.
Analysts said the move would boost investor confidence.
Unlike India's auton-omous stock market regulator, the Forward Market Commission (FMC) is controlled by government officials coming under the Food and Consumer Affairs Ministry.
It needs to seek government permission for many decisions.
"After an ordinance, a bill will also be brought in the parliament to make the FMC an autonomous and independent body," Parliamentary Affairs Minister Priyaranjan Dasmunsi told reporters at a cabinet briefing.
The government would also allow the introduction of options trading in commodities, a senior government official, who did not wish to be identified, said.
"The idea is to strengthen legal and regulatory framework in respect of commodity derivatives market and to grant autonomy to the commission to effectively regulate and develop commodity futures market," the official added.
She said the commission would be authorised to punish those who broke trading rules. The FMC's governing board would be increased to nine from five permanent members.
"The new law will help the FMC to come up on par with SEBI in terms of regulatory authorities," FMC Chairman B.C. Khatua said.
"We can now take independent action against defaulters and will also have punitive powers." The Securities and Exchange Board of India or SEBI regulates the country's capital markets.
The FMC would also have financial autonomy, P.H. Ravikumar, CEO of the National Commodity and Derivatives Exchange, said.
Commodities worth $900 billion were traded in 2007 and the turnover is expected to touch $1 trillion this year, Khatua has said.
"An independent FMC will boost confidence of investors who can look up to a regulator which has adequate powers to punish people trying to manipulate the trade," Avinash Raheja, senior vice-president of Comm-trendz, a consultancy firm, said.
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